Gambling

[jainen]

>>Is there a way to find out if this tax court ruling could be used in all juristictions or only in the juristiction in which it was handled?<<

Tax Court is not regional like District Courts. Its regular and memorandum decisions apply to everyone (unless of course the IRS does not acquiesce), but memorandum decisions are generally considered to have less authority as precedent. This is because they are used when the judge believes the issue primarily concerns the application of existing law or the determination of specific facts, rather than a new interpretation of law.

In my opinion, the use of a Memorandum Decision supports the understanding that this ruling does not conflict with or change the law. Note that an important element of the court's reasoning in defining transaction as an entire gaming session is that it would be "unduly burdensome" to treat each individual wager or play as a taxable event.

[Don in Upstate NY]

If it is up to 366 days, it doesn't go to line 21, it should go to schedule C or you need to call the gambler hotline for help.

"Addiction can be be problem" reports ATXaholics Anonymous :rolleyes:

[kcjenkins]

That's how I interpreted the ruling. You go to the casino and play all day. When you check out you calculate your net for that day, which is either a gain (gross income) or a loss, but NOT some of both. At the end of the year you add all your daily gains (up to 366 of them) and put the total on line 21. Then you add up all your daily losses (for those days when you didn't have a daily gain) and optionally put that total on Schedule A (limited to the line 21 number.)

[strictly speaking, the ruling implies that you do the netting every time you visit the cashier's cage to settle up. Daily seems to be a reasonable assumption.]

Sorry, Don, but I can't go with that one at all. If I follow your logic to it's conclusion, you would wipe out the entire amount of taxable income with those losses that the court ruled were not allowed.

Also, any time you do not report the ENTIRE about of the W-2G's on line 21, you are going to have to deal with the IRS. And they will tell you that, no, you should not have netted line 21, you should have put all the W-2G income on line 21 then put the allowable losses on Sch A.

I wish you were right. I'd like for you to be right. But I can not read it that way no matter how hard I try.

And Jainen, that is where I have a problem with your position. I'd love for you to be right, but I just do not see it working. If you read the code, and if you read the instructions behind both Line 21 and Sch A [for gambling] it just does not work the way this ruling did it. Logically, if they did not itemize, they should not have been allowed to take the losses, and would have had to pay tax on the entire amount of the W-2G. In fact, I could find you a number of excellent tax professionals who would argue that. based on the code, what belongs on Line 21 is ALL the winnings of every winning bet, not just the ones that get a W-2G.

[Pacun]

"A taxpayer may change an election to claim the standard

deduction at any time before the period of limitations has

expired. Sec. 63(e). Insofar as the record shows, petitioners

have not sought to change their election to claim the standard

deduction. In any event, on the record before us it would not

appear advantageous for petitioners to do so."

Sorry KC, I go with Jainen et all after carefully reading the case again.

[kcjenkins]

See, that is exactly where I have the problem, Pacun. If they had itemized, and they took the losses on Sch A, then they would have had $2000 on line 21, and then $900 on Sch A, and they would have arrived at $1100 taxable. I have no problem with that. BUT, since they did NOT itemize, how did the court justify letting them claim those $900 of losses as an offset to the $2000 win? The court made a big deal about not allowing the losses FROM THE DAYS WITH NO WINS but still counted the $900 from the day they won the $2000. EVEN THO THEY DID NOT ITEMIZE. And the code is clear that you can only take the losses as itemized deductions.

[Pacun]

"A taxpayer may change an election to claim the standard

deduction at any time before the period of limitations has

expired. Sec. 63(e). Insofar as the record shows, petitioners

have not sought to change their election to claim the standard

deduction. In any event, on the record before us it would not

appear advantageous for petitioners to do so."

This is what I understand what the court said: Since you didn't itemized before 3 years, and because maybe with the extra $1,100.00 in itemized deductions, you still wouldn't beat the standard deduction, we are not going to allow you other losses, except that we are going to adjust your basis on the day you won. Your basis on your winning day was $900 and you won $2,000.